On Wednesday, it almost seemed a throwaway question that revealed that AIB had in August 2012 shovelled €1.1bn of the €20.7bn taxpayer bailout into its pension fund to plug a hole which put at jeopardy “super pensions” payable to former executives at the helm of the bank during the boom which has now spectacularly turned to bust; it should be said that the pension fund also pays the more bread-and-butter pensions of former AIB employees who might have been on modest salaries. The transcript of the hearing is not yet available, so the deputy who first extracted the information from the AIB CEO David Duffy isn’t getting credit on here at this juncture.
Since Wednesday, there have been a number of messages received in confidence on here which suggest that we have just scratched the surface of bank pension funds and how they were managed prior to the bust, their activities in supporting bank share prices and how they have had to be rescued by the taxpayer. It seems like there might be (several) huge stories there, but they will require resources for a subject that goes beyond the remit of this blog.
What we know for now from the AIB hearing on Wednesday and the Bank of Ireland hearing on Thursday is that pensions of €500-650,000 are being paid to ex-AIB CEO Eugene Sheehy and ex-BoI CEO Brian Goggin. The AIB pension fund was topped up with €1.1bn of funds that can be attributable to the taxpayer bailout. It seems that the BoI top-up was not disclosed but BoI has to date received a gross bailout from the taxpayer of €4.7bn.
What we don’t appear to know if pension funds at Anglo or Irish Nationwide – now merged into IBRC – or at Irish Life – not split between Permanent TSB and Irish Life – or at the Educational Building Society, have been topped up with taxpayer funds. Nor do we know how exposed the banks’ pension funds were to shares in their own banks – after all we know that Anglo was keen for the Maple 10 to acquire shares in their bank, it is hardly beyond imagination that the Anglo pension fund also invested in Anglo shares.
This whole area seems to have received little oversight or scrutiny to date. And on a related subject, it is gobsmacking that AIB employees facing redundancy may get 5-6 weeks salary per year of service whilst Vita Cortex workers had to stage a sit-in earlier this year to secure just 2.9 weeks per year of service. Vita Cortex didn’t need a €20.7bn bailout from the taxpayer.
So here’s your blogpost to hang comments on. It will be updated when the transcripts become available, and judging by the volume of messages received, there may be further revelations which will also be posted here.
If there was ever a justification for a revolution this has got to be one! I am too sick and disgusted with all of the gangsters who have had a hand in covering up this scandal and betraya of the Irish people.
Reblogged this on Machholz's Blog and commented:
If there was ever a justification for a revolution this has got to be one! I am too sick and disgusted with all of the gangsters who have had a hand in covering up this scandal and betraya of the Irish people.
@ NWL The Anglo Irish Bank pension scheme was in a healthy state @ 30/9/2008 & 31/12/2009 showing a surplus of assets over liabilities. It appears the trustees were more careful than some of the members.
It remains in a healthy state with contributions of just €1M by the employer in 2011, down from €2M in 2010.
The mortality assumptions for current and future pensioners seem to take into account improvements in life expectancy.
It is a pity that the trustees were not running the bank!
Indeed. At the end of 2007, Anglo’s pension scheme had a surplus of €26 million over its actuarial liabilities of €97 million. The accounts show that the pension fund held just €1 million of Anglo shares.
By the end of 2011 the surplus had been reduced but still stood at €8 million. Whatever about AIB, there is little to excite in the solvency of the Anglo pension fund. As Niall says, it seems to have been the one thing that was well-managed in Anglo.
The Indo reported today on the results of a survey of pension funds at top Irish companies by Lane Clark & Peacock. It indicated that Anglo’s fund was the only fully funded DCF in 2011 (funded to 111pc, up from 101pc in 2010).
It also found that the pension deficit at AIB almost doubled last year to €763m from €400m.
More at http://www.independent.ie/business/irish/bailedout-anglo-irish-only-firm-with-fully-funded-pension-scheme-3281165.html
and http://www.lcpireland.com/news-and-publications/news/2012/lcp-launches-2012-pensions-accounting-briefing/
I mean reading this quite literally gives me that sinking, stomach upheval feeling, I’m not sure I can deal with yet another one of these stories of big guy/gals enriching themselfs while destroying the country. It’s enough to make a man reach for his passport.
Mr Michael Somers is an AIB ‘public interest’ director who has been fairly trenchant in his opposition to debt write-downs (ref Marian Finucane programme recently).
But neither Michael or any of the other AIB directors seem to have any problems with diverting bail-out funds to ensure that all staff, directors included can retire early and rich on the backs of citizens, many of whom have no pensions whatsoever.
And those funds were ‘diverted’, there is no other word for it. Look at the PCAR exercise. Where does it say that the ‘capitalization’ would be used for retiring people early on bonanza pensions? Nowhere. But there was specific funds earmarked for debt write-off.
It looks like our ‘public interest’ directors are in fact ‘bank interest’ directors.
A simple question on this.
Was there an independent second opinion sought from a trustee, who was not linked to or beholden to AIB, before the ‘deficit’ as (€763million) reported was accepted by the AIB board?
The second issue is that of the appalling performance of the pension trustees. There is certainly anecdotal evidence that the pension trustees, who in the main were subsidiaries of the banks, used those funds to buy disproportionate amount of ‘Irish’ banks shares. Was is a share support scheme? Nod, nod, wink, wink, of course not. Not the green jersey, but the bank jersey or more to the point the ‘bonus’ jersey.
So the forty branch closures are easy for AIB. The schmucks of taxpayers bailed out the banks, so that the bank could retire their esteemed elders into nirvana.
As for Anglo trustees being on the ball. Not really. Lack of service longevity would bring down the fund requirement.
The third issue in pension legislation. At present pension ‘legislation’ is nothing more than legitimised theft from younger members to the benefit of higher paid and elderly staff.
Governments and PS management and the Pensions Board quango have not been minded to change it, because they could not care less. It has no affect on their own pockets.
Its that simple.
I recall having a letter in the Indo a few years ago when one of the first tranches of taxpayer cash was given to AIB (think it was €8 billion).
I made what I thought was a very reasonable request: that AIB publish an estimate of where this public money would go – wages, losses on loans, advertising & the sponsorship of sports events, etc. To the nearest 10 million would do, I suggested.
I stand to be corrected, but I don’t think a breakdown of where the money went has ever seen the light of day.
Maybe Pearse Doherty would oblige with a question to the Minister for Finance?
If the insolvent banks had been properly allowed to fail and then restructured we would have solved all these problems of excessive pensions etc. The only way to correct the situation now is by a change in the constitution to allow retroactive change to certain types of contracts?
The most disgusting comment of all is this “Noonan: ‘I’m powerless to tackle bankers’ pay & perks’”
These bums deserve to be thrown out of office IMMEDIATELY.
Why?
Because they have done nothing to stop the rape of the state by a ‘protected elite’ and the hard-pressed taxpayers are having to foot the bill for EVERYTHING. All the ‘loans’ from the ECB (Germany) are being put on the Irish taxpayers backs.
The Germans must look on in disgust at the sorry mess we are constantly asking them to finance …..
An ESB executive was paid €744,443 in 2011.
And the company he works at has just 11 staff.
Two other executives at the company were paid €715,000 each.
http://www.independent.ie/business/irish/esb-fund-exec-earns-more-than-semistates-own-ceo-3281778.html
.
The man who bankrupted Allied Irish Bank, Eugene Sheehy gets an annual pension of €529,000.
http://www.independent.ie/national-news/noonan-im-powerless-to-tackle-bankers-pay-and-perks-3281794.html
.
Chancellor of Germany, Angela Merkel, gets a 2012 salary of: €204,000.
.
“The banks have an awful lot to answer for,” Martin McGuinness
.
@Brian McCarthy
““Noonan: ‘I’m powerless to tackle bankers’ pay & perks’””
Powerless or gutless.
The Minister could simply increase the ELG fee.
In fact after last weeks performance by Richie Boucher, I would double that fee.
If Richie is so solid a ‘commercial enterprise’ as he claims to be, he won’t need to pay, will he?
Regrettably, Noonan has options, but this administration has no guts, except when it comes to hitting home helps and people at the bottom of the pile.
I would call Richie’s bluff and bluster. The same with AIB etc.
And I would demand the ‘pension bonanza’ payment back on top of ELG.
Recapitalization as calculated was not intended for pay bonanza pensions.
In case you haven’t seen it, here is Richie stonewalling Sean Donnelly at the Joint Oireachtas Committee on Finance, Public Expenditure and Reform meeting on November 1, 2012.
It is staggering that someone could be CEO of a major bank and fail to understand what negative equity is and/or be so obstinate in the face of very reasonable (and overly patient) questioning by SD. Is it any wonder that with leadership like this, the banks are such an unholy mess.
@Brian, thanks for attaching that. What most people don’t realise about BoI is that, although we control just 15% of the ordinary shares, valued at €370m by the NTMA in December 2011, we have preference shares in that bank which were valued by the NTMA at €1.473bn in December 2011 and those shares could be used to exert overall control of the banks,
http://namawinelake.wordpress.com/2012/07/19/ntma-publishes-annual-report/
and of course the Government continues to provide a guarantee to BoI. And we supposedly have two public interest directors on the board, and I think after the last week, we are again scratching our heads as to what their role on the board is.
@Ahura, very well spotted, how did the stress tests in March 2011 examine the pension funds, and do we have a claim against BlackRock for incompetence in their carrying-out of the stress tests.
All I can say is that I am grateful to this blog for all the investigations you do. Thank you.
I think corruption in this country is staggering and we are only skimming the surface with what we know. Horrifically, the banksters continue in their arrogance and use fear & intimidation to scare their customers, who are finding it so difficult to pay their mortgages. I just wish we, the ordinary people in Ireland, could set up our own community banks and be done with the banksters!
Sincerely,
Trich
I don’t know enough about the legal responsibilities of AIB to its staff pension fund, but it seems very brazen to divert taxpayer money to the benefit of AIB staff.
From what little I know of the rules for staff defined benefit pension funds, Waterford Crystal workers could be left high and dry. Existing Waterford pensioners were safe, but future claims would not be honoured. Although I have sympathy for those workers that lost out, I don’t think the taxpayer should step in.
In AIB’s case, it’s not clear how much of the deficit relates to future liabilities. Why couldn’t the pension fund have been closed similar to Waterford Crystal?
The size of the ‘gift’ from AIB is huge. It’s not targeting the early retirees, but all employees in the pension scheme. If we assume 10k employees paying into the scheme, that’s €110,000 per employee.
Finally, did Blackrock capital (pcar exercise) include a 1.1bn transfer of assets to the staff pension fund?
[...] was not disclosed but BoI has to date received a gross bailout from the taxpayer of €4.7bn. Who knew we were bailing out more than just bondholders when we bailed out the banks Sign in or Register Now to [...]
The Aer Lingus approach to addressing the pension deficit is in stark contrast with AIB. Then again they no longer have access to public funds.
Here’s a link…
http://www.rte.ie/news/2012/1008/aer-lingus-pensions.html
“…In the statement, Aer Lingus outlined its proposals to address the deficit in the Irish Aviation Superannuation Scheme (IASS).
First, it proposed freezing the current IASS scheme and reducing risk by investing in bonds whose cash flows “broadly match” the IASS obligations.
It claimed this approach would deliver higher pensions than on a wind-up of the IASS, but would be at the sole discretion of the scheme’s Trustees.
It said that if the scheme had been wound up on 31 May, the current employees and former employees who have not yet retired would only have received 4% of their expected IASS benefits due to the deficit.
That outcome would be extremely damaging for the group, its employees and shareholders, it said.
However, Aer Lingus stressed that it would make no financial contribution to the IASS beyond its regular contributions, which would cease in any event when the IASS was closed to future contributions.
Once the IASS was frozen, Aer Lingus would establish a new Defined Contribution scheme on what it calls “competitive terms” to cover future service by employees.”
(I should say I’m no pensions experts and don’t know if there’s differing levels of guarantees offered by employers. For example if Aer Lingus can threaten winding up scheme, could AIB do the same?)
I don’t understand how people can be surprised by this? I really don’t. We’ve known about this from day one.
We mightn’t have known that the CEO of BoI would go on to treat Oireachtas members like South African segregationists used to treats people of other races, but we certainly did know that his salary and pension was going to be paid for in full by the bailout monies.
(We also mightn’t have known that BoI currently has no official way of recording negative equity in its loan book, but never mind)
We recapiatlise them, including provison for residential writedowns, they stuff it into their pension funds, hoard the cash and stop lending, now a new low refuse to discuss or engage with the oireachtas committee……
Appoint a receiver to BOI and threaten them with liquidation, we might see Mr Boucher change his tone and answer questions. Maybe Angela Merkel would sit up and take note also…. Or at the very minimum convert those preference shares and nationalise this outfit… then sack his sorry ass!
This nonsense must end when the personal insolvency laws come in next year there will be another wave of recapitalisation….